Home Worth:
What is a CMA?

Chances are you have seen the abbreviation CMA in conjunction with the question "What is your home worth?"  If you have wondered what a CMA is and how it helps answer the home value question, you will find the following overview helpful.

CMA stands for comparative market analysis, which is an evaluation of a property's value based on local market data.  This evaluation is usually prepared by real estate agents who are looking to determine the potential sales price for a property on the open market.  Agents also prepare CMAs to help their buyer clients decide on an offer price.

When providing a CMA, agents analyze listing and sales data for comparable properties in the area.  Specifically, this includes information about:

  • Properties that have sold and closed (transferred ownership)

  • Active listings -- properties currently for sale

  • Pending sales -- listings that have sold but not yet closed

  • Expired listings -- properties that did not sell during the listing period

What does this information tell agents about price for the subject property of the CMA?  Homes for which the sale has either already closed or is pending serve as the most reliable indicators of the price a similar property is likely to bring.   Information about homes currently for sale helps agents gauge the pricing position of competing properties.  And expired listings can shed light on pricing the market will bear, especially if those listings were priced well above comparable homes that have sold.  Of course, you need to remember that there may be other factors involved in the failure of those properties to sell.

Once analyzed, this information gives agents a picture of the local marketplace.  How accurate that picture is depends in part on the quality of the data used to prepare the CMA.  Ideally, properties used for comparison should be as similar in physical characteristics as possible to the subject property.  Also, the sales data should be recent.  Sales occurring no longer than six months ago are a general rule of thumb used my agents.  There will be situations, however, where the timeframe on sales data may need to be adjusted.  If, for example, the area where the property is located has either slow or brisk sales activity, the time period looked at would be adjusted accordingly.   In the case of brisk activity, six months may be too long, and a shorter prior time window would be considered.

What can you expect to see in a CMA?  A completed comparative market analysis is presented in the form of a report.  It capsules information about the subject property and the comparable properties used.  You will typically see a price range rather than a specific set price.  And, some agents may include brief statements on their observations or their perceived selling points about the property.

Whether you are a buyer or seller, keep in mind that a CMA is not an appraisal.  A real estate appraisal is a very comprehensive evaluation performed by an independent professional appraiser that involves additional data and process.  Also understand that the agent's experience in the business and familiarity with the local area can affect the accuracy of the CMA.  Know, however, that a CMA prepared by an experienced agent with good knowledge of the local market is usually right in line with the appraised value.  A CMA can therefore be a very useful tool no matter which party you are in the real estate transaction.

Information is for educational and informational purposes only and is not be interpreted as financial or legal advice. This does not represent a recommendation to buy, sell, or hold any security. Please consult your financial advisor.